Providence Company uses departmental manufacturing overhead rates to apply overhead.Direct labor cost is used to apply manufacturing overhead in Department A and machine hours are used for Department B. What predetermined overhead rate would be used for departments A and B respectively?
A) 83%; $5
B) 83%; $3
C) 120%; $3
D) $8.40; $5

Question

Providence Company uses departmental manufacturing overhead rates to apply overhead.Direct labor cost is used to apply manufacturing overhead in Department A and machine hours are used for Department B.  What predetermined overhead rate would be used for departments A and B respectively?
A) 83%; $5 
B) 83%; $3 
C) 120%; $3 
D) $8.40; $5

Quizplus · Accepted Answer

Department A uses direct labor cost as the allocation base, and Department B uses machine hours. Therefore, the predetermined overhead rate for Department A would be based on direct labor cost, and for Department B it would be based on machine hours. Option C is the only choice that includes different rates for each department, with a 120% rate for Department A using direct labor cost and a $3 rate for Department B using machine hours. The other choices do not differentiate between the two departments or do not have the correct combination of percentage and dollar amounts.

Providence Company Uses Departmental Manufacturing Overhead Rates to Apply Overhead